China Auto puts off US share offering
China Auto Rental, the country's largest car-rental provider, postponed its US share offering due to weak demand, a sign that the raft of accounting scandals plaguing mainland companies is still souring investment sentiment.
The car-hire firm that expected to raise up to US$137.5 million by floating 11 million American depositary receipts on the Nasdaq market failed to attract enough orders from American investors, a setback to mainland initial public offering applicants after a crisis of confidence that led to a six-month drought for Chinese companies' US listings.
'Due to the current capital-market conditions, China Auto Rental Holdings has decided to postpone its proposed initial public offering,' the company said in a statement.
The failed IPO followed an unsuccessful fundraising by Guangzhou-based online retailer Vipshop, which cut its offering by 39 per cent last month.
Vipshop was the first Chinese company to secure a US listing after online video company Tudou started trading in August last year.
'The failed IPO by China Auto wasn't a surprise, since US investors are still concerned about the quality of Chinese firms,' said Ray Lu, a Hotung Ventures manager. 'To be precise, investors are still doubtful of the truthfulness of mainland companies' balance sheets.'
At least five Chinese companies filed applications to the US Securities and Exchange Commission for IPOs from the beginning of this year, in a bid to gauge Americans' appetite for mainland firms.
A spate of accounting scandals were exposed last year after a record 45 Chinese firms' IPOs flooded the New York Stock Exchange and Nasdaq in 2010.
Dozens of Chinese firms including financial-software maker Longtop Financial Technologies were found to have falsified financial records or overstated assets and cash balances. More than 20 companies announced auditor resignations, accounting problems, or both in mid-2011.
Venture capitalists and private-equity fund managers said more mainland companies were taking a wait-and-see attitude towards US IPOs amid a tighter scrutiny of accounting records and lower buying interest.
China Auto would not be able to meet the profit requirements of the China Securities Regulatory Commission (CSRC) to launch an IPO on the mainland.
The CSRC will not approve an A-share listing unless a company reports profits for three consecutive years. China Auto, founded in 2007, lost 151 million yuan (HK$185 million) last year.
The amount in US dollars that China Auto expected to raise by floating 11 million depositary receipts on the Nasdaq market